Finances are a huge problem in relationships. In fact, money is the leading cause of stress in relationships, according to the American Psychological Association (Source: American Psychological Association. (2019). Stress in America™: Paying with our health.). People grow up and experience life differently, which can lead to conflicting financial goals or strategies. This is more than fine, but it is important to be open to discussing new goals and strategies with your partner. Money is a piece of paper with a value that is relative to you and your life. How can we let a piece of paper like that come between a bond of two humans? So, let’s talk about it today because a joint financial plan is critical to building a strong financial foundation in your relationship.
First have a conversation
Start the conversation early. It’s best to start a conversation about finances early in the relationship, even if you are not yet living together or sharing expenses. It would be a good idea to discuss your financial goals, spending habits, and debt obligations to ensure that you are both on the same page. An early conversation can help you and your partner avoid surprises down the road. Be as transparent as possible. Be honest about any financial mistakes that you have made in the past, such as missed payments or overspending, so that you can learn from them and move forward together. Do not judge each other during this conversation.
Next, Talk About Financial Goals
Discuss your aspirations and desires for the future and create a joint financial plan that reflects these goals. This includes talking about your short-term and long-term goals, such as saving for a down payment on a house or planning for retirement. This will help you create a roadmap for achieving your financial goals together. Set up a plan to review your financial goals regularly and be prepared to adjust them as necessary to reflect changes in your financial situation or priorities. This can help you develop a comprehensive budget plan that considers both incomes and expenses, which will help you achieve your joint financial plan.
While developing a budget, you might identify areas where you can cut back on expenses, which can help you achieve your financial goals more quickly. This is a sensitive area, so approach this with caution. Humans do not like being told that they should stop doing something. Find areas where you can cut back and bring them up first and perhaps address areas your partner can consider cutting spending by framing it as a question that comes across as supportive and curious. i.e. “Do you think we should get some more canned coffee from the grocery store so that we are both not spending money on coffee out every day? Would it be wise for us to invest in a coffee maker? What do you think?” Find a synergy during this process, teamwork makes the dreamwork – especially in this case.
Talk about investing and investments with your partner during this exercise. Talk about your risk tolerance and/or investment preferences (e.g. are you risk averse? Do you like real estate investing, ETFs, Index Funds, etc.?) and get to know your partner’s risk tolerance and/or investment preferences. If neither of you know much about investing, take a course, read about various concepts on knowxchange.com, or figure out what books can help you learn more about the topic. It is also a great idea for you and your partner to visit a financial advisor or planner to develop an investment plan that aligns with both of your goals and risk tolerance. Regularly review your investment portfolio and adjust it as necessary to ensure that it remains aligned with your financial goals.
Manage your Finances Together
To manage your finances more efficiently and effectively, consider setting up joint accounts. For example, a joint checking account can help you and your partner manage shared expenses, such as rent, energy, water, etc. This step should be reached when you are living together with a strong commitment to each other. Additionally, a joint savings account can be used for you and your partner to save for emergencies and long-term financial goals. Joint accounts will help you both manage your finances more effectively and ensure both are committed towards the joint financial plan.
Another tip that will always come up when it comes to financial plans is to plan for the unexpected. Unexpected expenses that might arise from a medical emergency or job loss happen and it is important to consider such expenses in your financial plan. Make sure that you have an emergency fund set up that can cover living expenses for a period, the mainstream recommendation is to save an emergency fund of about three to six months. This can provide a cushion during challenging times and help you avoid going into debt or depleting your savings.
Revisit and Revise
Personal finance is iterative. It takes time and involves you setting a goal, working towards it, life smacks you in the face, so you revisit and revise that goal. Therefore, plan on revisiting your joint financial plan regularly to ensure that you are on track to achieve your financial goals. Life is unpredictable, and your financial situation and priorities can change over time. Set a date to revisit your financial plan together, perhaps monthly, quarterly, biannually, or annually. The frequency will depend on you and your life, but the idea is valid because it will ensure your plan aligns with your life. The regular revisits will also help you get more comfortable talking about your finances with your partner. I am not sure why this has to be such a problem among people in relationships. Be honest, be up front, be open to learning new things, get your head out of the dirt and listen to your partner’s perspective on these things. If you’re struggling with sticking to your budget or achieving your financial goals, talk about it together and come up with a plan to address any challenges. You got this.
Final Thoughts, For Now
So don’t be afraid to have an open, honest, and transparent conversation with your partner about finances. If you can do it earlier in the relationship, that is perfect because it will help you get comfortable with this and enable you to revisit your financial plan regularly. This will help both of you build a strong and successful financial future together. You might have read this thinking “oh yeah easy for me to say here, that will never work in my life”.. maybe it will, maybe it will not work… maybe that is an easy cop out for you to avoid having an uncomfortable conversation with your partner…maybe there is a deeper issue at hand, maybe you’re in debt and embarrassed, maybe you do not understand finance and do not want to come across as dumb… these are excuses that should not be allowed to continue.. if you need the confidence on topics, check out other posts and pages on this site. We try to cover a bunch of stuff here to not only teach you basic high-level information, but also to give you the confidence to have these more uncomfortable conversations.
Disclaimer: I am not a financial advisor. The content on knowxchange.com or “this site” are for educational purposes only and merely cite my own personal opinions and experiences. In order to make the best financial decision that suits your own needs, you must conduct your own research and seek the advice of a licensed financial advisor if necessary. Know and understand that all investments involve some form of risk. There is no guarantee that you will be successful in making, saving, or investing money. Additionally, there is no guarantee that you won’t experience any loss when investing. Please seek the advice of a financial professional and do your own research.